So here’s an idea for the brave and those who buy into Warren Buffett’s saying ‘be greedy when others are fearful and fearful when others are greedy’. The prospect of regime change in Egypt has created a lot of uncertainty in the region and the Market Vectors Egypt Index ETF (EGPT) is down ~20% from its peak. It would probably have dropped lower but as of Friday the ETF held around 38% cash … no doubt its managers felt it was prudent to take some money off the table.
Will the current turmoil hurt company profits and economic growth, yes. However Egypt has not had negative GDP growth for 50 years. Now may not be a perfect time to buy into the Egyptian fund, however the likelihood is that the growth rate of the country will continue and maybe even accelerate if democratic reform arrives.
The Egyptian population are well educated, there are 82million of them and they have perfect positioning between the Middle East and North Africa (which is also booming). If Egypt reforms, it could become another Turkey. Add in an amazing tourism industry and the prospect of a democracy, I think it is potentially very exciting as an investor.
So, if you’re brave, investing in an Egyptian ETF might be a good long term bet. However, you should expect extreme volatility – the ETF only has $25million under management so is very small. You should always research any investment – please find more information about the holdings of the EGPT ETF here
NOTE: For the non-investors, ETF stands for ‘Exchange Traded Fund’